Enterprise Software Monetization is Fat-Tailed

URL: https://whoisnnamdi.com/software-fat-tailed/


Here, land and expand is effectively an indexing strategy — land at as many organizations with as little investment as possible. Every once in a while you'll land a Google, a Facebook, or an Amazon (both figuratively and literally) which will drive a disproportionate share of revenue.

Further, it can make sense to overspend somewhat on establishing those small beachheads, as they likely underestimate the true average contract value. For this reason, common metrics for evaluating the efficiency of software sales like the "magic number" may underestimate the efficiency of land and expand models, especially during the land phase.

The mathematical analysis inside here is pretty rad.